Why mortgage accounts for less than 3% of housing finance in Nigeria
Unlike its peers in Africa and despite the touted growth in its economy, mortgage penetration in Nigeria is still less than 1 percent and accounts for less that 3 percent of housing finance and homeownership. In other jurisdictions, especially the advanced economies, individuals and households buy homes through credit given to them by mortgage banks or other mortgage lending institutions.
Poor mortgage penetration is reason a city like Lagos has over 60 percent of its estimated 22 million population living in rented accommodation, and about 80 percent of its housing stock is funded from household income.
Experts say that housing finance by public authorities in Nigeria is about 10 percent; mortgage banks contribute about 2 percent, while contribution from banks and other institutions is insignificant.
According to them, whereas mortgage contributes about 40 percent of housing finance in South Africa, in Ghana, a smaller West African country, the contribution is 3 percent, but in Nigeria, touted as Africa’s largest economy, the contribution is less than 3 percent.
At an economic forum in Lagos recently, Edem Bassey, a mortgage expert, explained that the low mortgage contribution to housing finance in Nigeria is due to the cumbersome and unfriendly land administration in the country, pointing out that Nigeria ranks highest in property registration and construction permits.
“Nigeria is ahead of all other African countries in procedures legally required for registering property; it takes about 360 days to register property here as against Ghana’s less than 10 days,” he said, adding that in some states, the cost of registering property is about 15 percent of the value of the property.
He added that there were altogether 16 stages and 60 steps to getting a property registered in those states, eight stages and 30 steps for each of the lender and the borrower, stressing that this explained why it was difficult to get mortgage for housing finance.
“Ghana before now had a dysfunctional land administration, long and expensive procedures that lasted up to five years and involved six different agencies supervising which resulted in inefficient state land bureaucracy and customary tenure,” Bassey noted.
But when government of that country instituted reforms, property registration was cut down to 34 days and queues at the lands commission disappeared, making it possible for the mortgage sector to thrive.
In Egypt, he added, government identified high fees and inefficient government agencies that hindered the formalisation of real estate as a major issue and sorted it out by reducing property registration fees and simplifying the property registration process, thus encouraging citizens and companies to obtain titles.
He, therefore, called for discarding of multiple verification payment, deployment of Global Information Services (GIS), making payments with a single receipt, improving capacity building and significant investment in technology.
Bassey advised further that government should use Land Use Act to empower people and not as an economic and political tool by state chief executives, adding that the Act should be taken away from the constitution so that it could be easily tinkered with.
He recommended that land administrators should adopt what he called three-one-three strategy for land registration, explaining that land titles should be perfected in three days, at one central place, and at the cost of 3 percent of the value of the land.
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